Soaring Mortgage Rates... Household Loans Increased by 41.6 Trillion Won Last Year

Last year, household loans increased by more than 41 trillion won. This was the result of an expanded increase in bank sector mortgage loans (jumdae) as demand for purchasing homes with Didimdol and Buteemok funds rose.

According to the Financial Services Commission on the 15th, the total household loans across all financial sectors last year increased by 41.6 trillion won (provisional) compared to the same period the previous year. While the annual increase in household loans exceeded 100 trillion won in 2020 and 2021, it decreased by 8.8 trillion won at the end of 2022 during the interest rate hike period. Household loans then turned to increase again, recording a growth of 10.1 trillion won in 2023.

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The increase in household loans last year was led by mortgage loans. Mortgage loans increased by 57.1 trillion won mainly in the banking sector, expanding the increase compared to 45.1 trillion won the previous year. In particular, bank mortgage loans increased by 52.1 trillion won due to rises in Didimdol and Buteemok loans (39.4 trillion won) and bank’s own loans (31.6 trillion won). Policy mortgages such as the Bogeumjari Loan decreased by 18.9 trillion won.

However, last month, the increase in both household loans and mortgage loans slowed down. Monthly household loans across all financial sectors increased by 5 trillion won as of November but only rose by 2 trillion won last month. Mortgage loans increased by 3.4 trillion won last month, down from 4 trillion won the previous month. A Financial Services Commission official explained, "This is due to seasonal factors such as decreased moving demand in winter and the postponement of loan execution amid expectations of further interest rate cuts."

Household loans in the secondary financial sector decreased by 4.6 trillion won compared to the end of the previous year, but the decrease narrowed compared to the previous year (-27 trillion won). By sector, credit card companies (3.2 trillion won), savings banks (1.5 trillion won), and insurance (500 billion won) increased, while mutual finance decreased by 9.8 trillion won.

The household debt-to-GDP ratio fell to 90.8% as of the third quarter last year. This figure was 98.7% in 2021 but was recorded as 97.3% and 93.6% in 2022 and 2023, respectively.

A Financial Services Commission official evaluated, "Last year, housing transactions increased mainly in the metropolitan area, and the expectation of interest rate cuts led to a decline in loan interest rates, expanding the increase in household debt." However, "since the implementation of the second phase of the stress total debt service ratio (DSR) in September, the growth has slowed, and overall household debt is being stably managed within the nominal growth rate."

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